Under the swap agreement with the RBI, the Maldivian central bank was allowed to draw up to US$100 million after issuing a guarantee of MVR1.5 billion, the equivalent amount in local currency.

An official from the MMA told the Maldives Independent that the “reserve management” measure was taken after the investment in the Maldives Airports Company Ltd’s corporate bond.

The US$100 million has to be paid in three months at an interest rate of about three percent. The official said the agreement can be extended for a further three-month period.

“Such transactions to balance reserves is common among other countries as well,” the official said, requesting anonymity. “There is a framework that India has with SAARC member countries to allow such transactions to help with reserve management.”

The RBI also signed a currency swap deal worth US$700 million with the Sri Lankan central bank in March last year.

Asked whether the Maldives’ reserve in December was sufficient to pay for imports, the MMA official declined to comment.

“There was a huge draw-down on the reserve after the bond. That was one reason MMA made the transaction,” he said.

According to MMA’s monthly economic review reports, the usable reserve at the end of October stood at US$187 million.

However, despite investing US$140 million in mid-November, the MMA said the usable reserve position at the end of November was US$110 million.

The usable reserve is the funds readily available for use in the foreign currency exchange market. It is derived from deducting short-term foreign liabilities from the gross international reserve, which stood at US$543.08 million at the end of October.

The MMA official suggested that the higher figure may have been due to “foreign currency components of loans the government acquired or a rise in dollar revenue.”

In November, the MMA told the Maldives Independent that it invested in the corporate bond “to assist the MACL, and in turn the government, in meeting its financial commitments.”

“The MMA as the central bank is responsible for financial sector stability and ensuring there are no disruptions on international payments or transfers with the rest of the world,” the central bank’s media official said.

“Secondarily, the move was an investment decision with a good return in the medium term.”

The amortised bond has a coupon interest rate of 4.9 percent per year and the MACL will repay principal and interest on a monthly basis.

Following the revelation, the main opposition Maldivian Democratic Party warned that the country’s usable reserves have fallen to dangerously low levels and accused the governor of overstepping her authority to do the government’s bidding.

The governor’s admission of investing in the bond was also at odds with Attorney General Mohamed Anil’s claim that MACL paid GMR from its own funds. The company’s managing director told local media that it built up a “massive reserve” from its profits after GMR’s eviction in 2012.

The GMR payout coupled with a persisting US dollar shortage and a rising black market premium meanwhile fuelled speculation that the Maldivian Rufiyaa could be devalued.

But the MMA’s media official said at the time that there was no cause for concern.

“At the moment there is no additional pressure to the foreign exchange market due to the investment made in the MACL bond,” he said.

“In managing the foreign currency reserve, MMA has been investing in securities and other financial instruments. The MMA is confident that the current exchange rate mechanism can be maintained sustainability, and there are no on-going discussions regarding any changes to the exchange rate mechanism or parity.”